Business entities Flashcards
(31 cards)
VTD capital plc v nutritek international
court reviewed peircing veil for first time in 35 years.
lord neuburger critisesd the unprecise nature of the test in the obiter of woolfson and the fact it relied on words like facade and cloaks ratehr than legal principle which can lead to moral indignation.
woolfson wasn’t repealled only heavily undermined in this case- doubts expressed better in prest
prest v petrodel
involved a divorce. p breahced orders so had to disclose financial affairs. said that viel not been peirced but in fact the properties belonging to the petrodel were being held in trust for prest and given his control he could require them to be transfered over to ex wife.
LORD SUMPTION gave leading judgement rejecting facade test, he distinguished between two principles;
1. CONCEALMENT PRINCIPLE- ‘ ‘the interposition of a compnay or perhaps several companies so as the conceal the idenities of the real actors. court then look behind the facade to see the companies real positiion but the veil is not peirced
y has been used to thwart a third parties exisitng
2. EVASION PRINCIPLE- veil can be peirced but only when the company is being used to thwartor frustrate a third parties exisitingn legal right (se guilford v horne)
prest v petrodel
involved a divorce. p breahced orders so had to disclose financial affairs. said that viel not been peirced but in fact the properties belonging to the petrodel were being held in trust for prest and given his control he could require them to be transfered over to ex wife.
LORD SUMPTION gave leading judgement rejecting facade test, he distinguished between two principles;
1. CONCEALMENT PRINCIPLE- ‘ ‘the interposition of a compnay or perhaps several companies so as the conceal the idenities of the real actors. court then look behind the facade to see the companies real positiion but the veil is not peirced
y has been used to thwart a third parties exisitng
2. EVASION PRINCIPLE- veil can be peirced but only when the company is being used to thwartor frustrate a third parties exisitingn legal right (se guilford v horne). Seperate leagl personality can be ignored if an existing legal right agaisnt a person who sets up a new compnay to avoid this obligation then the veil can be pierced..
Directors
forming a comonay- s.7-28 compnaies cact. requires 4 documents;
memorandum of association
s.7-9 and section 31 mainly section 8- sinformaiton on the members of a company. this must be delivered to the registrar.
it is not possible to alter the mem of associationbut can alter the objects clasue
articles of association
main consitutuional document. these are PUBLIC and describe the internal running of a company
s.17
articles of association (the articles) if notne are registered then model ones put in place- s.20
rayfieild v hands
article document must be commerically workable. is possible to imply a term into articles (ag for beleize v beleize telecom
how to change the articles
by SPECIAL RESOLUTION in a general meeting-s.21- 75% majority- a general meeting is a meeting of the shareholders
if want to change article- must be ‘bona fide for the beneit of the company as a whole
allen v gold reefs of west africa
leading case- gave rise to bona firde test- englsih case but followed in scotland.
court said change to provision of lien on shares that weren;t fully repaid was extended- this deemed ok by the courst- said that power under s.21 to change must be exercised according to general principles of law re minorities and majorieits but that also be bona fide for whole benefit ect
sidebotton v kershaw lease and co
this applied the bona fide test, in scotladn - same as above that it is beneficial for a company to adjust articles f=so that sahreholders could not be competitiors
citco bank cropm v pussers
the bona fide test should be done objectivly
requirments for the registration of companies- section 9
include things like proposed name
registration
section 14- compnaies must be registered under this section and under s.15 register will issues a certificate of incorperation; this will include things like name and registered numebr of the compnay
section 33
the role of the company’s constitution- it is a conract between company and memebrs
section 9(6)
required documents must eb delivered to the resiter of companies. registered office is were the documents can be served ont he company and the company is deemed to have notice of them
certificate of incorperation
certificate recicev on incorperatioon
wood v odessa waterworksue
was it within the power of the existing shareholders to instst agaisnt the will of the minority on the division of profits- held that articles of asscoiation constisyte a contract between shareholders and company but also ebtween one another. therefore couldn;t chnage as was agaisnt articles.
ely v positive life assurance
put provision in articles when he drew them up (a solicitor) that he would be the companys solicitor and undertake their elgal work. when he was dispensed he challanged the decsion. was not bringin a claim as a shareholder therfore articles didn;t apply to him so could not insist that they we enforced.
Hickman v kent or romney marsh sheep breeders
supported the view in ely and woods.
also that a third party whom the articles purport to give rights to cannot sue- rights exisst as a seperate contract
1. no article shall constitute a contract between a third party and the company
- no right can be given to third party other than that f a memeber which can be enforced
shareholder agreement
concerns certain courses of conduct
russel v northern bank development
HOL upheld agreement that there would be no increas in companies share capital unless unanimous written consent ebwteen parties
lord jauncey commented that sahreholders who are partid to an agreement will be bound by it and those who don;t won’t
ultra vires sage
companies used to have ot be formed for particular objects . could get monye back if you lent it to a company and they were acting ultra vires- now this has changed- section 31- a company’s objects are unrestricted unless articles restrict them
section 41
allows companies to set aside trasnactions involving director or someone involved with the director (connected eprson) if they ahve exceeded their powers- personal liability imposed on directors where they enter into breach transactions.
remedies are
1. transaction is voidable- unless innocent 3rd party effected
indemnity
